White House proposal to increase alternative vehicle tax credits

Mar 6, 2014
Source: The Detroit News

The White House is proposing cutting taxes on liquified natural gas to spur the use of the fuel by alternative vehicles, while again calling for hiking the maximum tax break for electric vehicles and other advanced vehicles to $10,000, over the current $7,500.

In the U.S. Treasury’s nearly 300-page analysis of the Obama administration’s tax proposals as part of its budget, it lays out a series of proposals to boost alternative vehicles. The sweeter tax breaks for EVs and other advanced vehicles would cost $4.8 billion through 2024.

The Treasury Department said the budget would make the credit available to a wider range of technologies and remove the cap placed on the number of vehicles per manufacturer that can receive the credit.

But the bigger tax cut would not apply to luxury vehicles with a sales price of more than $45,000, including the Tesla Model S and the Cadillac ELR. The tax credit for those vehicles would be capped at $7,500.

The Obama administration said it wants to reduce the federal excise tax on liquified natural gas to 14.l cents per gallon from the current 24.3 cents to make it “at parity with diesel fuel on an energy-content adjusted basis.” Given the low volumes, the administration estimates it would cost the Treasury just $20 million through 2024.

In October, GM said it would start selling a small number of cars that can run on compressed natural gas. GM said it plans to produce less than 1,000 bi-fuel Chevrolet Impalas that can run on CNG and gasoline. Chrysler Group LLC is offering heavy-duty Ram pickup trucks that run on CNG.

The United States has large reserves of natural gas, but few cars have been sold that run on it. Only Honda Motor Co. sells a car that runs on CNG – a version of the Honda Civic – but several automakers sell medium and heavy trucks and vans that run on the fuel. GM sells a bi-fuel version of its heavy trucks and CNG-powered Chevrolet Express vans.

The Treasury proposal would also allow the dealer to offer a point-of-sale rebate to buyers rather than requiring taxpayers to file for the tax credit on their income taxes.

The White House also wants to lift the 200,000 vehicle cap per manufacturer after which the credit phases out over a year. Instead, the White House would begin to phase out the credit starting in 2019 for all manufacturers.

The credit would be completely phased out by 2022, and fall to 75 percent of the current credit starting in 2019.

The White House also wants to boost a fuel-cell credit. The current credit is $20,000 for vehicles weighing more than 14,000 pounds and $40,000 for vehicles weighing more than 26,000 pounds. It expires in 2015.

There is no tax incentive for other types of alternative-fuel vehicles (vehicles operating on compressed natural gas, liquified natural gas, liquified petroleum gas, hydrogen, or any liquid at least 85 percent of the volume of which consists of methanol) weighing more than 14,000 pounds.

The White House’s proposal would allow a tax credit of $25,000 for dedicated alternative-fuel vehicles weighing between 14,000 pounds and 26,000 pounds, and $40,000 for dedicated alternative-fuel vehicles weighing more than 26,000 pounds that would last until 2019, and then be phased out in 2020.

The White House last year explained the reason for the higher tax credit by referencing Obama’s goal in 2008 “of putting 1 million advanced technology vehicles on the road by 2015.” This year, the Treasury Department dropped that language.

In January, Energy Secretary Ernest Moniz acknowledged that meeting that goal would be a “stretch,” because sales haven’t met the government’s prior expectations.